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BMW's First-Quarter Profit Was Okay, But 2020 Will Be a Tough Year

By John Rosevear – May 7, 2020 at 5:15PM

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BMW was willing to give some guidance for 2020. It wasn't upbeat.

German luxury-vehicle maker BMW (BAMXF 6.52%) (BMWYY -0.59%) said on May 6 that its first-quarter operating profit rose to 1.38 billion euros ($1.49 billion) from 589 million euros a year ago, when its result was dented by a hefty antitrust fine from the European Union.

Despite the impact of COVID-19 on BMW's operations around the world in the first quarter, and a 20.6% decline in vehicle deliveries from the first quarter of 2019, the company managed a net profit of 574 million euros for the period, down only slightly from last year.

BMW also provided some updated full-year guidance for investors, revised downward for the second time this year.

The BMW logo atop its corporate headquarters in Munich, Germany

Image source: BMW AG.

The raw numbers

Metric Q1 2020 Change vs. Q1 2019
Revenue 23.25 billion euros 3.5%
Autos delivered 477,111 (20.6%)
Earnings before interest and tax (EBIT) 1.375 billion euros 133.4%
EBIT margin, automotive segment 1.3% 2.9 pp higher
Net income 574 million euros (2.4%)
Earnings per share 0.84 euros (1.2%)
Free cash flow, automotive segment (2.22 billion euros) 1.66 billion euros lower

Data source: BMW AG. Pp = percentage points. As of May 7, 1 euro = about $1.08.

BMW cut its full-year guidance

While noting that uncertainties around the pandemic make it difficult to provide an accurate financial forecast for 2020, chief financial officer Nicolas Peterwas willing to update some of the guidance he gave on March 18, when the scale of the pandemic wasn't yet fully clear. He said that as of now, auto investors should expect:

  • Automotive EBIT margin in the range of 0% to 3%, with deliveries down "significantly" from 2019. (Prior guidance: between 2% and 4%.)
  • Motorcycle EBIT margin between 3% and 5%, with deliveries down "significantly" from last year. (Prior guidance: 6% to 8%.)
  • Return on equity in BMW's financial-services segment to "drop moderately" from 2019. (Prior guidance: a "slight decrease" from last year.)

As for the company's overall performance, he would only say that he expects BMW's pre-tax profit to be "significantly below" the 7.12 billion euros it earned on that basis in 2019.

Highlights of BMW's first-quarter report

  • BMW's research and development spending remained high in the first quarter, as it continued development on upcoming electric vehicles and self-driving technologies. But at 1.38 billion euros, it was down about 1.1% from the first quarter of 2019.
  • Capital expenditures in the quarter were 687 million euros, versus 999 million euros a year ago.
  • Sales of BMW-brand vehicles fell 20.1% from a year ago. Sales were down across the model range, with only the X4 and X5 crossovers avoiding double-digit-percentage declines.
  • Sales of Mini-brand vehicles fell 23.4% from a year ago.
  • Rolls-Royce sold 853 vehicles in the quarter, down 27.2% from a year ago. The group's sales were hit hardest in China, the first country to deal with the outbreak of the novel coronavirus. Sales in China across BMW's auto brands were down 30.9% from a year ago. Sales in Europe fell 18.3%; sales in the U.S. fell 17.4%.
  • BMW Motorrad, the motorcycle segment, sold 34,774 motorcycles and scooters, down 9.9% from a year ago.
  • Motorrad's EBIT margin was 12.9%, down from 15.2% a year ago.
  • The financial-services segment's pre-tax profit fell 22.8% from a year ago, to 484 million euros, on the need to increase risk reserves amid the pandemic.
A gray Rolls-Royce Phantom, a large ultra-luxury sedan, on a country road

Rolls-Royce sales fell 27.2% in the first quarter. Image source: BMW AG.

What BMW said about cash and liquidity

BMW issued bonds totaling 3.4 billion euros in the quarter, in an effort to offset the effects of lower delivery volumes. It ended the quarter with 18.8 billion euros in total liquidity, up a bit from 17.4 billion euros at the end of 2019.

"We still have the best [credit] rating of any European car manufacturer and the second-best worldwide," Peter said. "Because of our solid credit rating, we continue to enjoy good access to international capital markets."

Peter also said that BMW will pay its annual dividend and profit-sharing to employees as planned.

"We keep our word -- and that is more important than ever during this crisis," he said.

John Rosevear has no position in any of the stocks mentioned. The Motley Fool recommends BMW. The Motley Fool has a disclosure policy.

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